FACTORS AFFECTING FINANCIAL PERFORMANCE OF ETHIOPIAN INSURANCE COMPANIES

Abstract

Factors’ affecting financial performance of Ethiopian insurance companies has been considered to be an important issue on financial performance of Ethiopian insurance companies. The study used balanced panel data model and collect data from Seven insurance companies covering the period of ten (10)consecutive years, 2010-2019.To this end, the study employed quantitative research approach and explanatory research design. The study used panel data techniques specifically fixed effect model on the regression analysis and used E-view10 software. The study used one dependent variable return on asset (ROA), seven independent variables that are Credit risk, liquidity ratio, company size, technical provisions risk, underwriting risk, inflation rate and deposit interest rate. The regression result show that credit risk, liquidity ratio, and technical provisions risk show negative and significant effect at 5% significance level and underwriting risk Negative at 1 % Significant level on financial performance of insurance companies in Ethiopia, In addition company size and deposit interest rate have positive and significant effect at 5% significance level on financial performance of insurance companies in Ethiopia, Where as inflation has insignificant effect at 5% significance level on performance of insurance companies. The study concluded that factors affecting on the performance of Ethiopian insurance companies has significant effect on the performance of Ethiopian insurance companies. Based on this finding, the study suggests that, the management bodies of the insurance companies should give high attention on firm and industry related variables, particularly by adopting better risk management strategies and better internal control to achieve superior profitability.